SECTION 5 - TRANSITIONAL PROVISIONS
ARTICLE III-197
1. Member States in respect of which the Council has not decided that they fulfil
the necessary conditions for the adoption of the euro shall hereinafter be referred
to as "Member States with a derogation".

2. The following provisions of the Constitution shall not apply to Member States
with a derogation:

(a) adoption of the parts of the broad economic policy guidelines which concern
the euro area generally (Article III-179(2));

(h) appointment of members of the Executive Board of the European Central Bank
(Article III-382(2));

(i) European decisions establishing common positions on issues of particular
relevance for economic and monetary union within the competent international
financial institutions and conferences (Article III-196(1));

(j) measures to ensure unified representation within the international financial
institutions and conferences (Article III-196(2)).

In the Articles referred to in points (a) to (j), "Member States"
shall therefore mean Member States whose currency is the euro.

3. Under Chapter IX of the Statute of the European System of Central Banks
and of the European Central Bank, Member States with a derogation and their
national central banks are excluded from rights and obligations within the European
System of Central Banks.

4. The voting rights of members of the Council representing Member States with
a derogation shall be suspended for the adoption by the Council of the measures
referred to in the Articles listed in paragraph 2, and in the following instances:

(a) recommendations made to those Member States whose currency is the euro
in the framework of multilateral surveillance, including on stability programmes
and warnings (Article III-179(4));

(b) measures relating to excessive deficits concerning those Member States
whose currency is the euro (Article III-184(6), (7), (8) and (11)).

A qualified majority shall be defined as at least 55% of the other members
of the Council, representing Member States comprising at least 65% of the population
of the participating Member States.

A blocking minority must include at least the minimum number of these other
Council members representing more than 35% of the population of the participating
Member States, plus one member, failing which the qualified majority shall be
deemed attained.

ARTICLE III-198
1. At least once every two years, or at the request of a Member State with a
derogation, the Commission and the European Central Bank shall report to the
Council on the progress made by the Member States with a derogation in fulfilling
their obligations regarding the achievement of economic and monetary union.
These reports shall include an examination of the compatibility between the
national legislation of each of these Member States, including the statutes
of its national central bank, and Articles III-188 and III-189 and the Statute
of the European System of Central Banks and of the European Central Bank. The
reports shall also examine whether a high degree of sustainable convergence
has been achieved, by analysing how far each of these Member States has fulfilled
the following criteria:

(a) the achievement of a high degree of price stability; this is apparent from
a rate of inflation which is close to that of, at most, the three best performing
Member States in terms of price stability;

(b) the sustainability of the government financial position; this is apparent
from having achieved a government budgetary position without a deficit that
is excessive as determined in accordance with Article III-184(6);

(c) the observance of the normal fluctuation margins provided for by the exchange-rate
mechanism of the European monetary system, for at least two years, without devaluing
against the euro;

(d) the durability of convergence achieved by the Member State with a derogation
and of its participation in the exchange-rate mechanism, being reflected in
the long-term interest-rate levels.

The four criteria laid down in this paragraph and the relevant periods over
which they are to be respected are developed further in the Protocol on the
convergence criteria. The reports from the Commission and the European Central
Bank shall also take account of the results of the integration of markets, the
situation and development of the balances of payments on current account and
an examination of the development of unit labour costs and other price indices.

2. After consulting the European Parliament and after discussion in the European
Council, the Council, on a proposal from the Commission, shall adopt a European
decision establishing which Member States with a derogation fulfil the necessary
conditions on the basis of the criteria laid down in paragraph 1, and shall
abrogate the derogations of the Member States concerned.

The Council shall act having received a recommendation of a qualified majority
of those among its members representing Member States whose currency is the
euro. These members shall act within six months of the Council receiving the
Commission's proposal.

The qualified majority referred to in the second subparagraph shall be defined
as at least 55% of these members of the Council, representing Member States
comprising at least 65% of the population of the participating Member States.
A blocking minority must include at least the minimum number of these Council
members representing more than 35% of the population of the participating Member
States, plus one member, failing which the qualified majority shall be deemed
attained.

3. If it is decided, in accordance with the procedure set out in paragraph
2, to abrogate a derogation, the Council shall, on a proposal from the Commission,
adopt the European regulations or decisions irrevocably fixing the rate at which
the euro is to be substituted for the currency of the Member State concerned,
and laying down the other measures necessary for the introduction of the euro
as the single currency in that Member State. The Council shall act with the
unanimous agreement of the members representing Member States whose currency
is the euro and the Member State concerned, after consulting the European Central
Bank.

ARTICLE III-199
1. If and as long as there are Member States with a derogation, and without
prejudice to Article III-187(1), the General Council of the European Central
Bank referred to in Article 45 of the Statute of the European System of Central
Banks and of the European Central Bank shall be constituted as a third decision-making
body of the European Central Bank.

2. If and as long as there are Member States with a derogation, the European
Central Bank shall, as regards those Member States:

(a) strengthen cooperation between the national central banks;

(b) strengthen the coordination of the monetary policies of the Member States,
with the aim of ensuring price stability;

(c) monitor the functioning of the exchange-rate mechanism;

(d) hold consultations concerning issues falling within the competence of the
national central banks and affecting the stability of financial institutions
and markets;

(e) carry out the former tasks of the European Monetary Cooperation Fund which
had subsequently been taken over by the European Monetary Institute.

ARTICLE III-200

Each Member State with a derogation shall treat its exchange-rate policy as
a matter of common interest. In so doing, it shall take account of the experience
acquired in cooperation within the framework of the exchange-rate mechanism.

ARTICLE III-201

1. Where a Member State with a derogation is in difficulties or is seriously
threatened with difficulties as regards its balance of payments either as a
result of an overall disequilibrium in its balance of payments, or as a result
of the type of currency at its disposal, and where such difficulties are liable
in particular to jeopardise the functioning of the internal market or the implementation
of the common commercial policy, the Commission shall immediately investigate
the position of the State in question and the action which, making use of all
the means at its disposal, that State has taken or may take in accordance with
the Constitution. The Commission shall state what measures it recommends the
Member State concerned to adopt.

If the action taken by a Member State with a derogation and the measures suggested
by the Commission do not prove sufficient to overcome the difficulties which
have arisen or which threaten, the Commission shall, after consulting the Economic
and Financial Committee, recommend to the Council the granting of mutual assistance
and appropriate methods.

The Commission shall keep the Council regularly informed of the situation and
of how it evolves.

2. The Council shall adopt European regulations or decisions granting such mutual
assistance and laying down the conditions and details of such assistance, which
may take such forms as:

(a) a concerted approach to or within any other international organisations
to which Member States with a derogation may have recourse;

(b) measures needed to avoid deflection of trade where the Member State with
a derogation, which is in difficulties, maintains or reintroduces quantitative
restrictions against third countries;

(c) the granting of limited credits by other Member States, subject to their
agreement.

3. If the mutual assistance recommended by the Commission is not granted by
the Council or if the mutual assistance granted and the measures taken are insufficient,
the Commission shall authorise the Member State with a derogation, which is
in difficulties, to take protective measures, the conditions and details of
which the Commission shall determine.

Such authorisation may be revoked and such conditions and details may be changed
by the Council.

ARTICLE III-202
1. Where a sudden crisis in the balance of payments occurs and a European decision
as referred to in Article III-201(2) is not immediately adopted, a Member State
with a derogation may, as a precaution, take the necessary protective measures.
Such measures must cause the least possible disturbance in the functioning of
the internal market and must not be wider in scope than is strictly necessary
to remedy the sudden difficulties which have arisen.

2. The Commission and the other Member States shall be informed of the protective
measures referred to in paragraph 1 not later than when they enter into force.
The Commission may recommend to the Council the granting of mutual assistance
under Article III-201.

3. The Council, acting on a recommendation from the Commission and after consulting
the Economic and Financial Committee may adopt a European decision stipulating
that the Member State concerned shall amend, suspend or abolish the protective
measures referred to in paragraph 1.